Time for a focus on value?

I should find more time to keep this site current, noting that the last time I posted a blog here was well over two years ago… However, in a way I think that reflects how many of us have been living our lives since the worst of the pandemic passed. It’s been flat out - whether for business or pleasure - enjoying a positive environment, whether for business or pleasure. However, in the last twelve months we have seen that begin to change, with the cost of money soaring, business conditions becoming tougher, and a cost of living crisis affecting all of us who live in the real world where we need to balance income and expenditure. That’s not to forget or ignore those who face a more existential crisis in Ukraine or Gaza.

Tougher conditions make you focus more on what you do, what you spend and where you invest. In the last year or so we have seen fraudsters jailed after their shiny businesses were exposed as frauds that turned out to be “too good to be true”. Zombie businesses that were supported through the pandemic by various types of goverment support have now had to close their doors. Start-ups that promised to disrupt the legacy players have found that life is much tougher than they experienced in the years of ‘free money’ and are being consumed into their former conquest targets or having to drastically reduce their ambitions. The IPO market has become much tougher as the froth that resulted in a number of pre-revenue businesses being valued at billions of dollars has evaporated, though some are still funding investors in sovereign wealth funds.

It may be a sign of age, or my Scots heritage, but I have never seen the sense of investing multiple billions in promises. I can only really speak directly from the perspctive that I have through my career experience and personal interests, but flying cars, robotaxis and hypersonic airliners all sit along some spectrum of un-investability that is closer to nuclear fusion than it is to a reliable return for my pension fund. All potentially possible, but with too many unanswered questions and technical challenges to be true investment opportunities where returns are delivered through demonstrated value, rather than riding a wave of hype that allows some investors to exit on the back of someone else’s gullibility. Viewed very narrowly as an opportunity to make money in the short term, than one could argue that if you believe someone can keep spinning credible stories for an extended period, then there is a good chance of making money on the back of that, but it has more in common with horse-racing than business.

Back in the real world, where I believe in businesses that add value by making things or providing services, the new economic environment will put more focus on the substance than on the hype. Ideas always need to be well-presented - both to engage potential customers, but also to win over your own staff and yes, to attract new investment. But, the essence muts be that what lies beneath is solid and real. It maybe on an evolutionary path, but there should be a pathway that has both a past and a future. Growth is good, but demonstrated success is the platform on which you can build. A solid business with no growth potential is unexciting and probably at risk, a great concept which would be worth a fortune if successful first needs to demonstrate viability. Value is where you have an acorn that can turn into an oak tree - that has value, and without the acorn, there can never be an oak tree.